BPCL divestment may be in jeopardy owing to rising fuel prices: Report

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Bharat Petroleum Corporation Ltd’s (BPCL) divestment might have just hit a major roadblock due to the rising fuel prices, which could hamper the prospects for potential buyers, Business Standard reported on Tuesday. According to the oil ministry, the daily pricing system of petrol and diesel has to bear the impact of higher international prices, which is passed on gradually to retail prices over a period of time. However, despite the higher international prices, the full impact is yet to be passed by the oil companies, it added.

Oil Marketing Companies (OMCs) take a hit when they sell petrol, diesel and Liquified Petroleum Gas (LPG), three of the most popular petroleum products in the country. But oil firms can recover from this, when crude oil prices comes down, it added.

The retail price of petrol is hovering around Rs 105 per litre and diesel at Rs 94 per litre. Domestic LPGs are being sold at Rs 884.50 a piece, with OMCs taking a hits of Rs 100 per cylinder.

Also, oil companies are bearing a loss with their existing marketing margin of Rs 3-4 a litre being trimmed.

New owner may not adhere to unofficial regulations

In the case of auto fuel prices, a major component of it consists of state and central taxes. When petrol is sold at Rs 101.89 per litre and diesel at Rs 90.17 per litre, the cost of the petrol excluding taxes is Rs 41.63 per litre and the cost of diesel is Rs 42.58 per litre.

Hence, due to high taxation maintained by states and the centre consumers continue to pay twice the cost of auto fuels.

The centre continues to push OMCs to keep petrol and diesel prices under check, though they have been officially deregulated. According to the publication, the probable new owner of BPCL may not want to adhere to these unofficial regulations.

However, the union government wants to officially continue regulating LPG prices in the country and the new promoter would be mandated to adhere to such regulations.